1 Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the years in issue, and

all Rule references are to the Tax Court Rules of Practice and

Procedure.

T.C. Summary Opinion 2008-35

UNITED STATES TAX COURT

TROY FISHER AND LISA CLEMENT-FISHER, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 6865-06S. Filed April 8, 2008.

Troy Fisher and Lisa Clement-Fisher, pro sese.

Mark H. Howard, for respondent.

VASQUEZ, Judge: This case was heard pursuant to the

provisions of section 7463 of the Internal Revenue Code in effect

when the petition was filed.1 Pursuant to section 7463(b), the

decision to be entered is not reviewable by any other court, and
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this opinion shall not be treated as precedent for any other

case. Respondent determined deficiencies of $3,147 and $4,260

for 2003 and 2004, respectively. After concessions by

petitioners, the issues for decision are whether: 

(1) Petitioners substantiated depreciation and section 179

deductions totaling $21,986 and $9,731 claimed on Schedule C,

Profit or Loss From Business, for 2003 and 2004, respectively,

(2) whether petitioners substantiated Schedule C car and truck

expense deductions in an amount greater than $7,127 for 2003 and

greater than zero for 2004, and (3) whether petitioners

substantiated deductions claimed on Schedule A, Itemized

Deductions, for employee business expenses related to car and

truck use totaling $3,407 for 2003.

Background

Some of the facts have been stipulated and are so found. 

The stipulation of facts and the attached exhibits are

incorporated herein by this reference. At the time they timely

filed the petition, petitioners resided in Utah. For 2003 and

2004, petitioners filed joint Federal income tax returns.

For 2003 petitioners claimed a Schedule C deduction for

depreciation expenses totaling $21,986. Respondent determined

petitioners had additional income of $656 as a result of a Utah

State tax refund. Petitioners concede the additional income. 

Additionally, respondent disallowed itemized deductions of
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$4,905. The disallowed deductions consisted of $1,499 in medical

expenses and $3,407 for vehicle expenses. The reduction in

medical expenses was a computational adjustment as a result of a

change in adjusted gross income. Further, respondent allowed

petitioners an additional deduction of $2,671 for Schedule C car

and truck expenses based on the standard rate method. 

For 2004 petitioners claimed a Schedule C deduction for

depreciation and section 179 expense totaling $9,731 and $4,759

for car and truck expenses. Respondent disallowed $1,280 of

petitioners’ claimed itemized deductions. The disallowed

itemized deductions consisted of $1,010 in medical expenses and

$270 of miscellaneous itemized deductions. As in 2003,

disallowed itemized deductions were computational as a result of

a change in adjusted gross income. Respondent allowed

petitioners an additional deduction of $1,024 for an increase in

self-employment tax.

Petitioners are owners of a collections business called TLC

Collections. Ms. Clement-Fisher started the business by handling

collections for her employer. Ms. Clement-Fisher filed claims in

small claims court and was paid a percentage of any money

collected. TLC Collections grew, and petitioners began handling

collections for United Shipping Solutions (USS) and several of
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2 USS is a company that buys space on planes, trucks and

ships, and ships packages. USS is headquartered in Midvale,

Utah.

its franchisees.2 As part of TLC Collections, petitioners used

their vehicles extensively to meet with clients, file documents

at the courthouse, and buy supplies. 

For 2003 petitioners claimed depreciation deductions for

three vehicles used by TLC Collections: (1) A 2002 Chevrolet

Malibu (Malibu), (2) a 2002 Chevrolet Silverado (Silverado), and

(3) a 2003 Chevrolet Avalanche (Avalanche). The Silverado was

purchased in January 2002 and had 19 miles on the odometer. On

August 29, 2003, petitioners traded in the Silverado for the

Avalanche. At the time of the trade-in, the Avalanche had 899

miles on the odometer, and the Silverado had 20,382 miles. 

Petitioners purchased the Avalanche for $41,935.02 and reported a

basis of $51,320 for the Avalanche on their 2003 return. For

2004 petitioners claimed depreciation deductions for two vehicles

used in their business: (1) The Malibu, and (2) a 1999 Chevrolet

Tahoe (Tahoe). Petitioners acquired the Tahoe in the summer of

2003 as a gift from Mr. Fisher’s father. Petitioners reported a

basis of $15,000 for the Tahoe on their 2004 return.

Petitioners kept handwritten logs for each of the vehicles

for both 2003 and 2004. The logs note where the vehicles were

driven and the total miles driven per trip. On occasion, there

are notes listing names of whom petitioners met with.
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At the end of each of the years in issue, petitioners did

not record the total miles that they drove each of the vehicles. 

On November 3, 2003, service records for the Avalanche show an

odometer reading of 1,000 miles. Petitioners’ mileage log

indicates 860 miles driven on the Avalanche as of November 3,

2003. On July 24, 2004, service records for the Avalanche show

an odometer reading of 20,024 miles. Petitioners’ accountant

Craig Stayner prepared an estimate of the total miles driven per

month and total miles driven for business purposes based on the

July 24, 2004, reading.

Discussion

Deductions are a matter of legislative grace, and the

taxpayer has the burden of showing that he is entitled to any

deduction claimed. Rule 142(a); New Colonial Ice Co. v.

Helvering, 292 U.S. 435, 440 (1934). Petitioners have neither

claimed nor shown that they satisfied the requirements of section

7491(a) to shift the burden of proof to respondent with regard to

any factual issue. Accordingly, petitioners bear the burden of

proof. See Rule 142(a). 

I. Depreciation

Section 167(a) allows a deduction for a reasonable allowance

for the exhaustion, wear and tear, and obsolescence of property

used in a trade or business or held for the production of income.

Section 274(d)(4) operates to disallow any deduction otherwise
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allowable under, inter alia, section 167 with respect to, inter

alia, any “listed property” unless the taxpayer satisfies the

substantiation requirements of that section. “Listed property”

is defined in section 280F(d)(4) to include passenger

automobiles. See sec. 280F(d)(4)(A)(i). As pertinent here,

petitioners may satisfy the substantiation requirements of

section 274(d) and the regulations thereunder by adequate records

or by sufficient evidence corroborating their own statements.

For 2003 petitioners reported a cost or basis for the Malibu

of $21,000 and a basis for depreciation of $12,732 and claimed a

depreciation deduction of $2,546. Petitioners reported a cost or

basis for the Avalanche of $51,320 and a basis for depreciation

of $16,163 and claimed a depreciation deduction of $1,616. 

Petitioners reported a cost or basis for the Silverado of $25,000

and a basis for depreciation of $10,938, and claimed a

depreciation deduction of $1,094. Petitioners also claimed a

special depreciation deduction for the Avalanche pursuant to

section 168(k)(4) of $16,162 for qualified listed property placed

in service during the tax year and used more than 50 percent in a

qualified business. Petitioners have provided supporting

evidence only for the Silverado’s cost or basis, not for the

Malibu’s, and therefore cannot support their depreciation

deductions for the Malibu. The purchase documents for the

Avalanche indicate a cost after fees of $41,936.02; however,
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petitioners reported a basis of $51,320. There is no evidence to

support the discrepancy in the cost or basis of the Avalanche. 

Because petitioners have failed to substantiate the total mileage

on the vehicles, they cannot demonstrate the percentage of

business use. Mr. Stayner testified that he estimated the total

mileage of the Avalanche for 2003. The November 3, 2003, service

report does not agree with petitioners’ mileage logs. While

petitioners credibly testified as to their business mileage, the

total mileage on the Avalanche and the other vehicles are

estimates. The rule in Cohan, which allows the Court to

approximate the amount of the deduction when the taxpayers have

failed to provide full substantiation, is not applicable in this

case. See Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930);

Sanford v. Commissioner, 50 T.C. 823, 828 (1968), affd. per

curiam 412 F.2d 201 (2d Cir. 1969). Accordingly, petitioners are

not entitled to their depreciation deductions.

For 2004 petitioners reported a cost or basis for the Tahoe

of $15,000 and a basis for depreciation of $6,729 and claimed a

depreciation deduction of $1,346. Petitioners claimed a

depreciation deduction of $681 for the Malibu. Petitioners

claimed a depreciation deduction for the Avalanche of $433. 

Petitioners also claimed a special depreciation deduction on the

Tahoe pursuant to section 168(k)(4), of $6,729 for qualified

listed property placed in service during the tax year and used
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more than 50 percent in a qualified business. As for 2003

petitioners cannot substantiate the cost or basis of the

vehicles, nor can they substantiate the total mileage driven for

each vehicle. Accordingly, petitioners are not entitled to their

depreciation deductions.

Petitioners have also provided no evidence to support their

2004 section 179 deduction of $824 or their 2004 Modified

Accelerated Cost Recovery System (MACRS) Depreciation of $151. 

II. Automobile Expenses

Section 162(a) allows a taxpayer to deduct all ordinary and

necessary expenses paid or incurred in carrying on a trade or

business. Pursuant to section 274(d), however, automobile

expenses otherwise deductible as a business expense will be

disallowed in full unless the taxpayer satisfies strict

substantiation requirements. The taxpayer must substantiate 

the automobile expenses by adequate records or other

corroborating evidence of items such as the amount of the

expense, the time and place of the automobile’s use, and the

business purpose of its use. See Sanford v. Commissioner, supra

at 827-828; Maher v. Commissioner, T.C. Memo. 2003-85.

As with the depreciation deductions, petitioners are unable

to meet the substantiation requirements imposed by section

274(d). While petitioners have mileage logs detailing their

business miles, they have only estimates as to the total mileage
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driven for the vehicles for each year. Petitioners have chosen

to use the actual expense method, yet they have produced no

evidence to substantiate the $4,456 claimed in 2003 nor the

$4,759 claimed in 2004.

Respondent has allowed petitioners automobile expense

deductions of $7,127 for 2003 and zero for 2004 using the

standard business mileage rate. Respondent did not allow

petitioners a deduction for 2004 because petitioners did not

appear for a meeting with respondent to discuss that year. This

was a misunderstanding and does not prevent petitioners from

being entitled to the standard mileage deduction for 2004. At

trial petitioners provided mileage logs for each of the three

vehicles used in 2004. The logs indicate that petitioners had a

total of 15,414 business miles for 2004. At the 2004 standard

mileage rate of $0.375, the total car and truck expense deduction

to which petitioners are entitled for 2004 is $5,780.25.

III. Employee Business Expenses

For 2003 petitioners claimed Schedule A deductions for

unreimbursed employee expenses of $3,407 related to the use of

their vehicles. Ms. Clement-Fisher’s primary occupation is

dental hygienist. As with the Schedule C deductions, petitioners

cannot substantiate their deductions because they cannot show the

percentage of employee business use for the vehicles. 

Petitioners have provided mileage logs, which entitle them to the
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standard mileage rate deduction for employee business expenses of

$0.36 per mile for 1,930 miles, or $695. But because they cannot

substantiate their deductions, they cannot deduct actual

expenses.

In reaching all of our holdings herein, we have considered

all arguments made by the parties, and to the extent not

mentioned above, we conclude they are irrelevant or without

merit.

To reflect the foregoing,

Decision will be entered

under Rule 155.